FPI invest over around Rs 11,000 cr in Indian G-sec post inclusion in Bloomberg bond index

Bonds

Foreign portfolio investors (FPI) invested around Rs 11,000 crore in Indian government securities, which is part of the global bond index, since its inclusion in the Bloomberg Emerging Market (EM) Local Currency Index.

According to Clearing Corporation of India’s (CCIL) data, FPI investment in Indian government bonds under the Fully Accessible Route (FAR) has increased to Rs 2.70 lakh crore as on February 4, after the inclusion in the Bloomberg bond index, from Rs 2.59 lakh crore as on January 30.

Bloomberg Index Services (BISL) added Indian bonds to its Bloomberg Emerging Market (EM) Local Currency Index on January 31.

The inclusion of these bonds will be phased in over a 10-month period starting January 31, 2025, which is when the index rebalancing took place, according to a document published by Bloomberg Fixed Income Indices.

The weight of India's FAR bonds will be increased in increments of 10 percent of their full market value every month over a 10-month period ending October 2025, at which point they will be weighted at their full market value (100 percent) in the indices, the Bloomberg document said.

On January 8, BISL opened a consultation to get feedback on the proposed inclusion of the India FAR bonds in the Bloomberg Emerging Market (EM) Local Currency Index.

Based on the feedback obtained during this process, BISL decided to include India FAR bonds in the Bloomberg EM Local Currency Government Index and all related indices (collectively, the “Indices”), the document added.

According to CCIL data, holding of FPIs in the current 10-year benchmark bond 6.79 percent 2034, has increased to 4.22 percent as on January 31 or Rs 5,576.702 crore in value terms, from 3.60 percent or Rs 4,746.456 crore in value terms as on January 30.

The holding in value terms in the new benchmark bond is of the total outstanding amount of Rs 1.32 lakh crore.

Similarly, in the old benchmark, bond holdings by FPI has increased to 9.55 percent or Rs 17,182.062 crore in value terms as on January 31, from 9.21 percent or Rs 16,569.087 crore as on January 30. The total outstanding is Rs 1.80 lakh crore.

The addition to the Bloomberg bond index is the second such inclusion after the Indian bonds were added to the JP Morgan emerging market bond index.

FPI invested Rs 62,431 crore in government bonds till November after their inclusion in the JP Morgan index, the Economic Survey 2025, which was released on January 31, said.

Since the announcement of inclusion of Indian Government Bonds (IGB) in the JP Morgan index in October 2023, there has been heightened activity in the FPI debt segment with cumulative flows of Rs 1.1 lakh crore from October 2023 to June 2024, the 2024-25 survey said.

On June 28 (2024), JP Morgan included 29 government securities under FAR in its emerging market index. India carries a 1 percent weight in the index, with planned incremental increases each month until March 2025.